Will Target (TGT) Stock Be Helped By Its Canada Fix?

Target (TGT) is repairing the supply chain problems it holds largely responsible for last year's botched Canadian expansion.

NEW YORK (TheStreet) -- Target Corp. (TGT) is repairing the supply chain problems it holds largely responsible for last year's botched Canadian expansion and expects to show measurable progress on a turnaround by this fall, Mark Schindele, Target Canada's new president, told Reuters.

In its first international expansion, Target opened an unprecedented 124 stores and three distribution centers in Canada last year, losing nearly $1 billion as sales fell far short of expectations, Reuters said.

TheStreet Ratings team rates TARGET CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TARGET CORP (TGT) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

TGT's revenue growth has slightly outpaced the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 2.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.

The debt-to-equity ratio is somewhat low, currently at 0.85, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.

TARGET CORP's earnings per share declined by 14.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, TARGET CORP reported lower earnings of $3.07 versus $4.53 in the prior year. This year, the market expects an improvement in earnings ($3.52 versus $3.07).

The change in net income from the same quarter one year ago has exceeded that of the Multiline Retail industry average, but is less than that of the S&P 500. The net income has decreased by 16.1% when compared to the same quarter one year ago, dropping from $498.00 million to $418.00 million.

Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, TGT has underperformed the S&P 500 Index, declining 19.79% from its price level of one year ago. Despite the decline in its share price over the last year, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry. We feel, however, that other strengths this company displays compensate for this.